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Kohl’s Is Betting on Amazon Returns to Drive Sales

It says volumes about the challenges facing brick-and-mortar stores that the “single biggest initiative” out of Kohl’s this year, according to the national retailer’s chief executive, is that it will now accept and process unwanted orders from Amazon.

Kohl’s said on Monday that it was now accepting Amazon returns at its more than 1,100 stores after running a pilot program in 100 locations. The retailer, which will pack, label and ship the returns for free, expects the program to benefit millions of shoppers along with bringing more people into their stores, Michelle Gass, the company’s chief executive, said in a statement.

The retailer, based in Menomonee Falls, Wis., tested the program, which has been closely watched by the industry and has elevated Ms. Gass’s profile, for about 18 months. It timed its national rollout to the back-to-school shopping season.

“It’s an interesting marriage because what Kohl’s needs is store traffic, and what Amazon needs is to make customers happier with a place to return their items,” said Oliver Chen, a retail analyst at Cowen. “The dream is that it’s a fair but attractive split where that shopper will come in and purchase other items.”

National chains have been devising a plethora of ways to accommodate new digital shopping habits, particularly of younger consumers, beyond simply managing their own online pickups and returns at stores. Nordstrom recently established an urban chain of stores, called Nordstrom Local, that do not carry any merchandise. The locations, which are about the size of a Lululemon or Dunkin’ Donuts, are mainly hubs for online pickups and returns, and have attracted a younger crowd compared with Nordstrom’s average shoppers.

Retailers are also looking to accelerate the delivery of items to consumers. Walmart, in its own competition with Amazon, shared plans in May to expand next-day delivery to 75 percent of the United States this year.

Kohl’s is unique in embracing Amazon, the nation’s e-commerce behemoth. The chain, which has tested its Amazon return strategy in Chicago, Los Angeles and Milwaukee, has also been increasing the number of its stores that carry Amazon products like smart home devices.

While Kohl’s has shared little about how the partnership works, it said on a May earnings call that it expected its expenses to increase because of store staffing and logistics for the returns program.

Ms. Gass, who took the reins at Kohl’s just over a year ago, emphasized on the call that working with Amazon was a “long-term bet” and beneficial for both companies.

“What’s really key and what our data would suggest is that we’re also bringing in a new customer and we’re bringing in a younger customer,” she said. “That is significant.”

The company, best known for selling apparel and accessories to families, reported revenue of $20.2 billion last year and net profit of $801 million. It doesn’t separate its store sales from its internet sales. Most locations are in strip malls or free standing.

Kohl’s has also been trying to increase store traffic by selling and leasing space to neighbors like Planet Fitness and the grocery chain Aldi, Mr. Chen said.

“You sort of see this revolution happening on the basis of footfall,” he said. “Kohl’s wants to be working from a position of strength where people will still need groceries and still work out and definitely still shop at Amazon.”